The Beginning of the End for Prohibition?

On Friday the 13th of April (of all days), the Washington Post broke a story that could transform the cannabis industry. Republican Senator Cory Gardner of Colorado announced a deal with President Trump that would cease his blocking of DOJ nominations in exchange for Presidential support for potential congressional legislation that would offer protection to state-legal cannabis programs.

Not since the Cole Memorandum in 2013 (which gave a green light to the Colorado and Washington to legalise cannabis in their own states) has news delivered as much forward-looking certainty for the industry as this has. This is the real deal. A real statement of intent from the White House to put lasting protections in place for states that have legalised Cannabis for medicinal and/or recreational use.

 Senator Cory Gardner (R-Colorado) Senator Cory Gardner (R-Colorado)

Time to celebrate?

Well, there were certainly many calls for a celebration, given Sen. Cory Gardner's statement that "President Trump has assured me that he will support a federalism-based legislative solution to fix this states' rights issue once and for all."

According to the Colorado Republican, Trump also pledged the Department of Justice won't interfere with Colorado's marijuana laws or businesses, a sign that the administration will take a hands-off approach toward legal Cannabis companies.

The only current federal law that has stopped the DOJ from interfering with state-licensed medical marijuana companies is the Rohrabacher-Blumenauer Amendment, which prohibits the DOJ from using federal funds to interfere with medical marijuana laws.

The R-B Amendment is technically a temporary law that must be renewed on an annual basis, meaning there are no permanent protections yet for cannabis companies from federal prosecutors. Presently its protectionism lasts until the end of September 2018.

Trump's support for a new bill could help push permanent legislation through Congress sooner rather than later. On the face of it – it looks like this could be the beginning of the end for prohibition.

Not just yet. First off, you have Trump who changes his mind at the drop of a hat. And, the most important part, this is not a done deal. There is much work that now needs to happen behind the scenes in order to migrate this from "Trump's promise and assurance" to a federalism-based legislative solution.

As Democratic U.S. Rep. Earl Blumenauer said in a statement, "This is another head-spinning moment. We should hope for the best but not take anything for granted. Trump changes his mind constantly, and the Republican leadership is still in our way."

"Momentum is clearly building in the states and here in DC. The tide is changing. Now is the time to redouble our efforts," added Blumenauer. This is not legalisation at the Federal level, nor is this the rescheduling of the drug from its current Schedule 1 status. Rather, this is a giant leap in the right direction. The direction of greater certainty. A greater certainty that new levels of protectionism will indeed be the foundation for the eventual legalisation at the federal level.

Someone once told me that memories take us back and dreams take us forward. So, let's dream together a little as we look forward to what federal legalisation might look like.

What could legalisation look like?

If the U.S. were to legalise cannabis at the federal level, it would reap a king's ransom in tax revenue over the next decade, as well as spur plenty of direct and ancillary industry job growth, according to a new report from cannabis data analytics firm New Frontier Data.



The report suggests that if the U.S. were to do away with its extremely strict Schedule I classification and legalise it for all 50 states, it could generate $131.8 billion in federal tax revenue between 2017 and 2025.

Additionally, legalising cannabis nationally would be a major boon to the jobs market. Aside from the vertical chain of production, from growers to processors, and then retailers, there are dozens of ancillary businesses that would benefit. These include banks, consulting services, logistics companies, marketing companies, accounting firms, and so on.

If legalised today, some 782,000 jobs would be created, per New Frontier. But by 2025, this figure will have grown to 1.1 million jobs. In effect, the legal marijuana could be the fastest-growing industry in the U.S. under such a scenario over the next decade.



So prohibition is ending?

Well, maybe. But not just yet.

For now, we have to turn our attention to President Trump and how much support he gives to legislation that changes U.S. federal laws on marijuana. There are two likely scenarios to be played out.

A return to a hands-off policy by the DOJ when it comes to states that have legalised marijuana either for medicinal and/or recreational use (think the Cole Memo), helps the marijuana industry but is really only a temporary solution. It would be like a classic game of snakes and ladders, and that scenario sends us right back down the board, with the overhang of federal intervention weighting heavily on the industry.

However, a change in U.S. federal laws that would recognise state legalisation of marijuana is a totally different story. And if regulations that restrict banks from providing services to marijuana-related businesses were lifted as well, the marijuana industry in the U.S. would be poised to explode. And we all have a pretty good idea just how big that could be.  Sometimes dreams can be closer to reality than we think.

And they told you money doesn't grow on trees

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Mark Bernberg
Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.

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